Options Strategist
Thank you for joining us at our recent webinar! We are thrilled by the engagement and insightful questions we received during the session. To ensure everyone benefits from the discussions, we've created this dedicated page where you can revisit the webinar and explore detailed answers to the questions posed by attendees.
Watch the webinar: Below you can watch the webinar at your convenience. Whether you're revisiting the content or experiencing it for the first time, this is your opportunity to engage deeply with the material presented.
Explore Q&A: Below the video, you'll find a comprehensive list of questions from our participants, along with thorough answers. This section is designed to enhance your understanding of options trading, covering everything from basic concepts to more advanced strategies.
Explore further resources: After watching the webinar and browsing through the Q&A, enhance your learning journey by exploring the list of useful articles provided below. These resources have been selected to deepen your knowledge of various aspects of options trading, from foundational techniques to more sophisticated strategies.
We hope this resource helps you in your trading journey and empowers you with the knowledge to make informed decisions. For any further information or ongoing support, please refer to our help-site, or consider registering for our future webinars to continue your learning and stay updated with the latest strategies and market insights.
Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks.We appreciate the curiosity and eagerness to learn that led to so many thoughtful questions during our webinar. To ensure that no query goes unanswered, we’ve compiled and responded to all the outstanding questions right here. This section is dedicated to providing you with clear, concise answers that will help deepen your understanding of options trading.
Browse through the questions below to gain insights into both fundamental concepts and advanced strategies. Each answer is designed to be informative and accessible, whether you're a beginner or an experienced trader looking to refine your approach.
Additionally, don’t miss our list of useful links and resources located below the Q&A, providing further material to expand your trading knowledge.
Q: Hi, are there “option premiums" charts like price of shares charts not just the "option chain" data"
A: Currently, our platform displays option premiums within the options chain, showing daily changes but does not feature continuous charting of option premiums like stock price charts. We recognize the value of such functionality and are planning to include it in the future, although a specific timeline has not been set. Stay tuned for updates as we enhance our tools to better serve your trading needs.
Q: if there is no volume on the option chain does it mean you can not trade at that price?
A: No, a lack of volume on the option chain does not necessarily mean you cannot trade at that price. It simply indicates that no transactions have occurred at that particular strike price and expiration during the trading day. You can still place an order at your desired price, but the execution of the order will depend on whether you find a counterparty willing to take the opposite side of the trade at that price.
Q: If you think a stock will go down you can short sell it. Is it better to use options and what is the difference.
A: Choosing between short selling and using options depends on your risk tolerance, investment strategy, and market conditions. Short selling involves borrowing shares to sell them at the current price, then buying them back later at a lower price, hoping to profit from the difference. However, it exposes you to potentially unlimited losses if the stock price rises, and importantly, short selling is not permitted in many regions, including the EU.
Using options, such as buying put options, can offer a lower-risk alternative. Puts give you the right, but not the obligation, to sell a stock at a predetermined price before the option expires, allowing you to profit from declines in the stock price. The maximum loss when buying options is limited to the premium paid, making it a defined-risk strategy. This can be particularly appealing if you want to limit potential losses while maintaining the potential for significant upside if your prediction is correct
Q: So when you are buying a CALL option is like going SHORT and a PUT is like going LONG - right ?
A: Actually, it's the opposite. When you buy a CALL option, you are going long on the stock because you are buying the right to purchase the stock at a specific price within a specific time frame, anticipating the stock's price will go up. Conversely, when you buy a PUT option, you are effectively going short on the stock because you are buying the right to sell the stock at a predetermined price, expecting the stock's price will decline. Both strategies are ways to leverage potential gains while limiting losses to the premiums paid for the options.
Q: I recently bought 3 points call option on FTSE100. The FTSE rose significantly, however, at the certain point (8040) the profit stopped increasing despite an increase in the FTSE by a further 60 points. I enquired and the reason given “lack of received quotes for the options”. What does this mean exactly? Does this happen often, as it would appear to significantly impact profit and any tip on how to negate against this? Many thanks
A: "Lack of received quotes for the options" means that there were no active market participants quoting prices for your specific call options at that strike price and expiry as the FTSE 100 reached 8040. This situation typically indicates low liquidity, where there are few buyers or sellers at that level, even though the underlying index continued to rise. Consequently, even if the index value increases, the options might not gain in value if there are no market participants willing to trade at those levels.
This issue can happen occasionally, especially with options that are deep in-the-money or those with strike prices far from the current market price. To mitigate against this, consider trading options that have higher liquidity, which often means selecting options with strike prices closer to the current price of the underlying asset or choosing options on more heavily traded indices or stocks. Always check the open interest and volume of an option before trading to ensure sufficient market activity to support entering and exiting trades smoothly.
Q: If I buy an option, but then I don't exercise my right before the expiry date (let's say I paid the option 10 dollars), will I only lose the price paid to buy the options (in this case 10 dollar's)?
A: If you purchase an option and choose not to exercise it before its expiry date, the maximum loss you will incur is the premium paid for the option, which in your example is $10. This is because when you buy an option, the premium paid upfront is essentially the cost for the potential to execute the trade at the agreed terms until the expiry. If you do not exercise the option, it expires worthless, and you do not have any additional financial obligations beyond the initial premium paid.
Q: May be too advanced for this session, but are longer-dated LEAPS better to buy time for the strategy to work out, eventually?
A: LEAPS are indeed beneficial for strategies that require more time to materialize. These options have expiration dates far in the future, typically up to three years from the current date, allowing a longer timeframe for the underlying stock to move in the desired direction. This extended period can be particularly useful in strategies where you anticipate gradual market shifts or need more time for certain events to unfold that may affect the stock price. Additionally, LEAPS can help reduce the impact of time decay on the option's value, especially in the earlier stages of the contract. However, they also usually come with higher premiums due to their extended duration. Deciding to use LEAPS should align with your overall investment goals, risk tolerance, and time horizon for the investment.
Please also see newly published articles about this topic at: https://www.home.saxo/content/articles/options/guide-on-long-term-options-for-strategic-portfolio-management-13052024
Q: How do I introduce multi leg options in the mobile platform? How do I determine at which price to buy one leg and at which price to sell the other leg? I saw just the option to out the credit or debit but not to adjust the price for the leg.
A: To introduce multi-leg options on your mobile platform, tap on the 'Strategieën' (Strategies in English) button shown in your app. This will allow you to configure various multi-leg strategies by selecting and adjusting the individual legs of your option trades. For detailed guidance on setting prices for each leg and further assistance, you can refer to the tutorials and resources available at help.saxo.
Q: Can I see the value graph for the option (to analyse the impact of price change on the value of the option- to simulate loss and profit - on the mobile app?
A: Currently, the mobile app does not support viewing a value graph for options to analyze the impact of price changes on the value of the option. This feature would allow you to simulate potential loss and profit scenarios, but it is not available at this time. For more detailed analysis, you may need to use the desktop platform or consult external tools
Q: Do you intent do introduce option wizard like IBKR? (To say what you think it will happen with the price and simulate a strategy based on what you introduced)?
A: I'm not familiar with the specific features of the Option Wizard like IBKR. However, it sounds like you might find similar functionality in the 'Risk graph' feature of our platform. This tool allows you to enter an options strategy and visualize potential outcomes, helping you analyze the impacts of different market scenarios on your trades.
Q: How can I see the Greeks when I put a buy order on the mobile platform (iOS)?
A: Currently, the Greeks are not viewable directly on the mobile app. To see the Greeks when placing a buy order, you'll need to access the full site on a mobile browser or use the desktop application. We recognize the importance of this feature and will consider including it in future updates of the mobile app
Q: Do you have to own the underlying stock in order to buy a call option
A: No, you do not need to own the underlying stock to buy a call option. Buying a call option gives you the right, but not the obligation, to purchase the underlying stock at a specific price (the strike price) within a certain period of time. It's a separate contract from owning the stock itself and can be used for speculative purposes or as a form of leverage to gain exposure to the stock's price movements without actually holding the shares.
Q: Do you have to own the underlying stock to buy a put option?
A: No, you do not need to own the underlying stock to buy a put option. A put option gives you the right to sell the underlying stock at a specified price (the strike price) before the option expires. This can be used for purposes such as speculation or hedging against a potential decline in the stock's price, without requiring you to first own the stock.
Q: Are the contracts always 100 x?
A: In the case of standard equity options in the United States, each contract typically represents 100 shares of the underlying stock. This multiplier of 100 is the standard for most equity options markets. However, there are exceptions, such as some index options or ETFs, which might have different multipliers or contract specifications. It's important to check the specific terms of the options you are trading, as these can vary depending on the market and the specific security. A known example is for example Adyen, which has a contract size of only 10 stocks.
Q: Is it 22:00 (USA market close) expiration time or midnight?
A: For standard U.S. equity options, the expiration time is typically at the close of the market, which is 4:00 PM Eastern Time (ET). This corresponds to 22:00 Brussels time. The options officially expire at this time on the expiration date, rather than at midnight. It’s important to check the specific details for each option as some types, like index options (the monthly’s of the SPX options is an example), may have different expiration times or criteria.
Q: Give us an example of how you buy a put option on this platform
A: To buy a put option on this platform, you would typically follow these steps:
For a more detailed walkthrough on how to buy a put option, including live demonstrations and step-by-step guidance, please join us for the next webinar on Wednesday, May 15th. This session will be a follow-up to our first webinar, offering deeper insights and practical demonstrations on the platform.
Q: If you hit place order now, will you pay the premium now at 200 strike or when it reaches 200?""
A: When you place an order to buy an option, such as a put or call option with a strike price of 200, you will pay the premium at the time of placing the order, not when or if the underlying asset reaches the strike price. The premium is the cost you pay upfront to hold the right to exercise the option at the strike price until it expires. This payment is made regardless of whether the asset ever reaches or surpasses the strike price during the life of the option.
Q: What happens if the option expires, while in the money - is there a kind of auto exercise feature?
A: Yes, if an option expires while it is in the money, Saxo has an auto-exercise feature. This means that the option will automatically be exercised on your behalf at the expiration date if it is in a profitable position relative to the strike price. For call options, this means the stock will be purchased at the strike price if the market price is higher; for put options, the stock will be sold at the strike price if the market price is lower. Please check our help-site to understand our specific policies regarding auto-exercise, as there may be options to opt out or requirements to ensure sufficient funds or holdings to cover the exercise.
Q: How can I see what stocks have an option chain available? Is there an easy way to see rather than click on each stock?
A: Currently, there isn't a feature on our platform that allows you to see all stocks with an available option chain in one view. To check if an option chain is available for a specific stock, you will need to search for and click on each stock individually. We understand the convenience such a feature would offer and can consider adding this capability in future updates.
Q: By default options data is 15 minutes delayed unless you buy the real time service?
A: Yes, by default, options data on our platform is provided with a 15-minute delay. If you require real-time options data, make sure to select the OPRA Data Level 1 subscription. This subscription will provide you with up-to-the-second updates on options.
Q: What is difference between bid and ask price
A: he bid price and the ask price are essential terms in trading, particularly relevant in the context of the options market:
The difference between the ask price and the bid price is known as the "spread." A narrower spread typically indicates a more liquid market, whereas a wider spread can indicate less liquidity.
Q: Are the expiry dates defined and “pre packed" by the seller??
A: Yes, the expiry dates for options contracts are predefined and set by the options exchange, not by the seller. These expiry dates determine when the option contract will expire and are standardized to ensure uniformity in the trading market. Options typically expire on the third Friday of the expiration month, though there are various other cycles and types of expiries (like weekly options) that cater to different trading needs.
Q: If you exercise a call option and the settlement type is physical, how many shares will you receive?
A: If you exercise a call option and the settlement type is physical, you will receive the number of shares specified by the contract's multiplier. In most standard equity options contracts in the U.S., the multiplier is 100, which means you would receive 100 shares of the underlying stock for each option contract you exercise. This is the standard practice, but it's important to check the specific terms of your options contract for any variations.
Q: How much would be the margin for selling a Put or a Call option?
A: The margin requirement for selling a put or a call option can vary significantly depending on several factors, including the underlying asset, market volatility, and the specific terms of the option itself. Here are some general guidelines:
The exact margin requirements can vary by margin profile setup and market conditions. Contact support or the Saxo help-site for detailed information.
Q: Is it right that being a seller is more profitable due to implied volatility
A: Selling options can often be perceived as more profitable due to the premium collected upfront and the role of implied volatility (IV) in option pricing. Here are some key points to understand why selling might seem more advantageous:
In conclusion, while selling options can be profitable, especially in high implied volatility environments, it requires careful risk management and understanding of market conditions to avoid significant losses. It's not inherently more profitable than buying options but can provide a different risk/reward profile that may be appealing to some traders.
Q: Does the stock's dividend have impact on expectancies of call or put ?
A: Dividends impact the pricing of call and put options. For call options, the stock price typically drops by the dividend amount on the ex-dividend date, reducing the option's value. Conversely, put options can increase in value as the expected drop makes it more likely for the put to be in-the-money. Thus, dividends make calls less attractive and puts more appealing due to the anticipated decrease in the stock price.
Please check out 2 great articles by my colleague, Peter Siks:
Q: In your experience, how far is the optimal time to sell the option ( I know it depends but just out of your own experience)? :-)'?
A: When it comes to selling options, a commonly preferred timeframe is around 30 to 45 days until expiration. This range is often chosen because it provides a good balance between premium received and time decay acceleration. Theta, or time decay, tends to accelerate as the option approaches expiration, which can benefit sellers as the value of the option declines faster, allowing them to potentially buy back the option at a lower price or let it expire worthless.
However, the optimal timing can vary based on market conditions, volatility, and personal risk tolerance. Selling options with more time can provide higher premiums but comes with greater risk of the underlying asset moving against the position. In lower volatility environments, traders might lean towards shorter durations to manage risk more effectively.
Remember, while these timeframes are commonly used, the best strategy always aligns with your specific financial goals and market outlook.
Q: What is considered to be a reasonable % return on an account for a professional options trader ?
A: The definition of a "reasonable" percentage return for a professional options trader can vary widely based on the trader's strategy, risk tolerance, market conditions, and the overall economic environment. However, professional traders often target annual returns ranging from 20% to 40%, although these figures can be significantly higher or lower depending on leverage, the nature of the options strategies employed, and individual performance.
For instance:
It's also worth noting that in professional trading, managing risk and preserving capital are often as important as achieving high returns. Effective risk management strategies are critical, as even professional traders can face significant volatility in returns, especially when trading options.
Q: Is it safer to exercise the call option as soon as it is profitable rather than waiting for the expiry date??
A: It's usually better to sell the option rather than exercise it early if it becomes profitable. This approach allows you to capture both the intrinsic value and any remaining extrinsic value. Exercising early often results in losing the extrinsic value, which could mean missing out on potential additional profit.
Q: What if the seller is manipulating a call with short selling around the strike date
A: If you suspect manipulation through short selling around an option's strike date, it can depress the stock price, potentially affecting the profitability of a call option. Market manipulation is illegal, and concerns should be reported to financial regulators. It's important to monitor trading patterns and manage risk appropriately.
Q: Will you do also a bit more advanced webinar for options?
A: Yes, we are hosting a more advanced options trading webinar this Wednesday, May 15th. Be sure to join us to deepen your understanding of options strategies and market dynamics.
Check: Mastering options - Advanced strategies and Saxo trading insights | Saxo Group (home.saxo)
Q: Will there be enough liquidity in taking far month option?
A: Liquidity in far month options can vary significantly and tends to be lower compared to near-term options. This is because there's generally less trading activity in options with longer expiration periods. Factors such as the underlying asset's popularity, market volatility, and recent news can influence liquidity levels. It's advisable to check the trading volume and open interest of specific far month options to gauge liquidity before executing trades.
Q: *Would you be happy with 2% weekly return on options?
A: A 2% weekly return on options trading is generally considered a (very) strong performance, especially when compounded over longer time-frames. However, achieving consistent weekly returns at this rate involves risk, and it's important to balance potential returns with risk management strategies to ensure long-term sustainability in your trading approach.
Q: How to sell multi leg options?
A: For detailed guidance on selling multi-leg options, please refer to our help-site or consider registering for our upcoming webinar, where we'll cover various strategies and provide live demonstrations to help you navigate complex trades effectively.
Check: Mastering options - Advanced strategies and Saxo trading insights | Saxo Group (home.saxo)
Thank you for exploring our detailed Q&A section. We hope the answers provided have enhanced your understanding of options trading and addressed your queries effectively. As you continue on your trading journey, remember that continuous learning and staying informed are key to success in the dynamic world of options.
Should you have any more questions or need further assistance, please don't hesitate to reach out through our help-site or join us in upcoming webinars for more interactive sessions and live demonstrations. Your growth and success in options trading are important to us, and we are here to support you every step of the way.
Dive deeper into your options trading education with our curated list of useful articles, each designed to enhance your knowledge and skills in specific areas of interest:
From zero to hero - buying options
This article provides an introduction to options trading, covering the basics of buying and selling options, how to make money with them, and the risks involved.
From zero to hero - selling options
This article specifically provides an introduction to selling options, often called premium selling and how to make money with them, as well as the associated risks involved.
From zero to hero - option strategies
The article outlines how to manage risks and enhance potential rewards by using defined risk strategies like vertical spreads and undefined risk strategies such as strangles. It offers insight into choosing between debit and credit spreads and explains the terms commonly used in options trading. The piece serves as a guide for investors and traders seeking to better understand and utilize options strategies in their portfolio management.
From zero to hero - options lexicon
This article serves as an essential guide to options trading terminology, providing a comprehensive list of keywords for anyone engaged in options trading. It offers an alphabetical table of terms with succinct descriptions, aiding both beginners and experienced traders in navigating this complex market. The guide is designed to enhance understanding and refine trading strategies.
Guide on long-term options for strategic portfolio management
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
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